Question

1. ABC Co. sold merchandise inventory on account for $10,000 that cost $7,000.

   Under the periodic approach, the entry (entries) at the time of the sale of the inventory on account is (are) as follows:

   	a.	Cost of goods sold……………………………….7,000           Inventory…………………………………………………7,000
   	b.	Accounts receivable……………………………10,000           Sales………………………………………………….…10,000                                                        and     Cost of goods sold……………………………….7,000            Inventory………………………………………………...7,000
   	c.	Accounts receivable……….……………………10,000           Sales………………………………………………….…10,000
   	d.	Cash………………………………………….…10,000           Accounts receivable…………………………………….10,000                                                         and      Cost of goods sold……………………………….7,000            Inventory…………………………………………………7,000

ABC Co. sold merchandise inventory on account for $10,000 that cost $7,000.

Under the perpetual approach, the entry (entries) at the time of the sale of the inventory on account is (are) as follows:

	a.	Cost of goods sold……………………………….7,000           Inventory…………………………………………………7,000
	b.	Accounts receivable……………………………10,000           Sales…………………………………………………….10,000                                                        and     Cost of goods sold……………………………….7,000            Inventory………………………………………………...7,000
	c.	Accounts receivable……….……………..……..10,000           Sales……………………………………………….……10,000
	d.	Cash………………………………………….…10,000           Accounts receivable…………………………………….10,000                                                         and      Cost of goods sold……………………………….7,000            Inventory…………………………………………………7,000

At year-end, the inventory account contains a balance of $460,000. A physical count shows that the inventory total is actually $455,000 as a result of normal shrinkage. The entry needed to record normal inventory shrinkage is as follows:

	a.	Cost of goods sold….……………………………..5,000            Inventory………………………………………………….5,000
	b.	Inventory….……………………………………....5,000           Cost of goods sold…….………………………………….5,000
	c.	Inventory shrinkage loss…………………………..5,000            Inventory……………………………………………….…5,000
	d.	Cost of goods sold…………………………………5,000            Inventory shrinkage loss………………………………….5,000

Answer 1